Correlation Between Tax-managed and Bridge Builder

Can any of the company-specific risk be diversified away by investing in both Tax-managed and Bridge Builder at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Tax-managed and Bridge Builder into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tax Managed Large Cap and Bridge Builder Trust, you can compare the effects of market volatilities on Tax-managed and Bridge Builder and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Tax-managed with a short position of Bridge Builder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax-managed and Bridge Builder.

Diversification Opportunities for Tax-managed and Bridge Builder

0.99

Correlation Coefficient

Tax-managed  Bridge Builder

No risk reduction

The 3 months correlation between Tax-managed and Bridge is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed Large Cap and Bridge Builder Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridge Builder Trust and Tax-managed is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Tax Managed Large Cap are associated (or correlated) with Bridge Builder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridge Builder Trust has no effect on the direction of Tax-managed i.e., Tax-managed and Bridge Builder go up and down completely randomly.

Pair Corralation between Tax-managed and Bridge Builder

Assuming the 90 days horizon Tax-managed is expected to generate 1.23 times less return on investment than Bridge Builder. In addition to that, Tax-managed is 1.01 times more volatile than Bridge Builder Trust. It trades about 0.19 of its total potential returns per unit of risk. Bridge Builder Trust is currently generating about 0.23 per unit of volatility. If you would invest  1,389  in Bridge Builder Trust on September 5, 2024 and sell it today you would earn a total of  147.00  from holding Bridge Builder Trust or generate 10.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Tax Managed Large Cap  vs.  Bridge Builder Trust

Tax Managed Large

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Managed Large Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Tax-managed may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bridge Builder Trust

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bridge Builder Trust are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Bridge Builder may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tax-managed and Bridge Builder

The main advantage of trading using opposite Tax-managed and Bridge Builder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax-managed position performs unexpectedly, Bridge Builder can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Bridge Builder will offset losses from the drop in Bridge Builder's long position.

The idea behind Tax Managed Large Cap and Bridge Builder Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.